Jetstar Not the Saviour
QANTAS chief executive Alan Joyce concedes Jetstar has limited capacity to relieve its parent of profit pressure, after the national carrier downgraded its full-year 2009 profit forecast by 80 per cent.
Mr Joyce told ABC TV that the company was approaching the limit of its ability to transfer capacity to Jetstar in order to cushion the profit and yield squeeze that led to last week's profit downgrade.
"We have done a lot of that in the last year. There is a limit to what we can do and I think we're getting to that limit," he said yesterday.
"A lot of the problem markets now for Qantas are probably markets that Jetstar's not the right model for: the Los Angeles market as an example."
Qantas slashed its 2008-09 pre-tax profit guidance from $500million to between $100 and $200million last Wednesday, and said it would retrench up to 1750 staff -- about 5 per cent of its workforce.
The airline will also ground planes and defer aircraft orders as heavy discounting takes its toll on yields amid a nose-dive in demand for air travel since the collapse of Lehman Brothers last September.
While Qantas Frequent Flyer, Jetstar and regional operations are still profitable, international operations -- its biggest divisional earner -- is leaking cash, especially at the front end of the planes.
"In the business class and first class -- the premium cabins -- we're seeing a drop internationally of over 20 per cent," Mr Joyce said.
"In economy, the volumes are actually holding. It's the yields that's the problem, so that we're actually getting less in terms of airfares because there's a lot of discounting."
In a separate interview on Sky News, Mr Joyce said the airline's previous market forecast had allowed for a drop in premium traffic of between 20 and 30 per cent, but the latest profit downgrade was due to fare discounts.
"Even in the last two weeks we've seen our competitors taking a 50 per cent discount on fares and we've matched (this) to remain competitive and that's causing our revenue to take a hit," he said.